IT in Cuba

Telecommunication Infrastructure

Liberalization and Deregulation

Internet Diffusion

Electronic Commerce

Hardware Manufacturing

Software Manufacturing

Who Uses IT?

IT Labor Market

IT Geographics

IT Financing

Government Policies

Legal Environment

Transborder Data Flows

Analysis: IT Strengths and Weaknesses

Analysis: Impacts on the Business

Sources and Links

About the Authors

 

Information Technology in Cuba

Analysis: Impacts on the Business

 

Introduction

To this point, this report has focused primarily on the export of Cuba's IT products and services. However, one must consider the equally significant role of IT opportunities within Cuba for globally competing firms. One must evaluate the Cuban IT support services sector and infrastructure to determine whether Cuban FDI and economic growth initiatives have a prospect for success in the future.

For a non-IT company considering establishing a presence in Cuba, corporate executives must consider the following key issues (excluding non-IT issues):

Would you set up a sales office in the country? Would you expand it?

Geographically, Cuba has a prime strategic location in the Caribbean and is in position to provide a company with a regional sales base. However, while less than 100 miles away from the United States, current political sanctions limit potential trade opportunities. Any company that establishes a sales office in Cuba must focus on either trading in the Caribbean/Latin American basin or utilizing the inexpensive Cuban labor base to create an off-shore software development site. The Cuban citizenry is highly educated and is capable of operating in a global sales venture. However, the Cuban government's discouragement of capitalism may have created a less aggressive mindset in terms of sales and business expansion.

In addition, the role of the Cuban government in the operations of any firm operating on the island must be considered. Censorship is a regular government function, and firms may find sales and promotional efforts restricted. In terms of technology, the government's Interministerial Commission determines who receives online access, and to date, has not granted such access to many private endeavors. In addition, the Cuban government does not have significant resources with which to lure foreign companies. The government could concede tax reductions, but formal financial incentives are unlikely.

Economic difficulties on the island may make Cuban expansion difficult. The country lacks hard currency and operates in a currency that is not accepted on the global markets. Converting the Cuban peso will be a formidable task, not to mention finding purchasers who have the currency to buy a firm's products. Venture capitalism is a budding concept in Cuba, but no formal VC operations are available.

Would you set up a regional distribution center?

Cuba would not be a prime location for a regional distribution center unless a firm's focus is on the Caribbean and Latin American markets. Cuba's closest geographic neighbor is the United States; however, with the existing political sanctions, no Cuban-American trade is likely to occur in the immediate future. Using Cuba as a distribution site may prove advantageous to obtaining a market presence in the Latin marketplace, particularly to Argentina and Mexico, the largest Latin American consumer markets.

Would you set up a manufacturing center?

Cuba lacks the key economic resources and infrastructure found in many Caribbean and Latin American nations. Subsequently, it may be difficult to locate an appropriate existing location for a manufacturing center or to locate available resources with which to create a new center. However, the industry in which a prospective Cuban business entrant operates is key to determining the viability of a manufacturing center. Cuba does have thriving regional businesses in several key industry sectors, such as biotechnology, multimedia, and sugar and agricultural processing. Should a prospective company operate in one of these sectors, existing sites and resources may be available to effect an easy transition into the Cuban manufacturing sector.

Potential Cuban entrants should be aware that the Cuban government has not adopted ISO 9000 certification standards. For global firms operating in Europe or other locations which abide by this standard, products manufactured on the island may not be acceptable for trade in many global locations.

Support for Network Infrastructure: Availability of Infrastructure, Cost, Quality

One of the firm's primary considerations to the feasibility of Cuban operations would be the amount of communications traffic it must engage in on a daily basis, whether inside Cuba or to its home country and/or peripheral locations. The Cuban telecommunications infrastructure is still underdeveloped, with four phones per 100 citizens. Carlos Lage, Secretary of the Cuban Executive Council of Ministers, stated at a planning meeting of the Communist Party that "one telex can cost twelve dollars whereas the same message costs 75 cents in the form of a fax and 3 cents via the Internet" (95). Telecommunications costs may be significantly higher than in the firm's home country. Telecommunications professionals may also be scarce and dated in the knowledge they possess. In addition, given the recent restrictions on Cuban-American telecommunication, the company may be hampered if a significant portion of its operations is directed towards the United States.

Global firms may also be hindered by a national lack of Internet access. With few commercial or consumer users and high costs for computer equipment and infrastructure (one Windows-based, IP-ready computer costs approximately $1,000), firms may be restricted in the level of Internet communication they conduct. The domestic network infrastructure firms seek may not be present, and firms may subsequently incur increased telecommunications costs.

IS Professionals to Support IS: Training, Cost, Quality

Cuba does have a skilled IS workforce with which to support distribution and manufacturing operations. Many of the Cuban high-tech workers currently have little opportunity to utilize their skills outside of government positions and would likely be eager for an opportunity to accept a private company position. The average Cuban citizen receives a monthly income of $15 US. Assuming that a global firm would pay higher wages, the firm would likely have an adequate base of IS professionals from which to choose.

However, what Cuban IS professionals lack is a current knowledge and training skill set on par with the latest technologies. Most Cuban networks are operating on the X.25 protocol, which is rarely found in most developed countries.

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